Superannuation account fees can cost as much as $77,000, but they’re simple to avoid
Australia’s most costly fee has been uncovered — and it could set you back more than $77,000. Here’s how you can avoid it.
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Exclusive: Australia’s most costly fee has been uncovered — and it could set you back more than $77,000.
Annual fees charged to manage superannuation vary widely, between $238 and $1000-plus each year for a typical $50,000 account, new research has found.
If that $762 annual difference continues and compounds over a 30-year working career, the overall loss to an individual can be $77,800 at retirement, News Corp Australia calculations have found.
And this doesn’t include the ridiculously high fees some super fund members are paying on products they opened before trailing commission bans and fee transparency began in 2013.
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RateCity director of research Sally Tindall said super fund members should not turn a blind eye to the fees they were paying.
“If people calculated how much they would be shelling out in fees and adding compound interest, a lot of them would be shocked at how high the bill becomes,” she said.
Ms Tindall said some of the most wasteful super fees were caused by having multiple accounts “that could easily be rolled into one account”.
The Australian Taxation Office’s my.gov.au website allows people to check their super fund balances and consolidate several funds into one.
“Be across what fees your super fund is charging and what you are getting in return,” Ms Tindall said.
“Look at past performance and fees together and make an informed decision. After all, super is your money, but it’s one of those things that you don’t see — it’s out of mind, out of sight.”
RateCity’s super fee research found that the average super fee on a $50,000 account was $693.
Financial strategist Theo Marinis said “fees aren’t everything, but they eat into your return”.
“If you pay 0.4 or 0.5 per cent more over 10 years it does make a difference. Saving 0.5 per cent doesn’t sound like much, so people ignore it,” he said.
Some of the most horrendous investment fees are charged on old super fund accounts that were opened before 2013. Mr Marinis said he had come across ongoing annual advice fees of 2-4 per cent charged on these old account balances when they should only be about 0.5 per cent.
“Some super products still charge a 2-4 per cent contribution fee every time you receive an employer contribution.”
“The industry evolved from a sales environment, so you have to shop around and keep asking questions,” Mr Marinis said. “It’s your money.”
The recent financial services royal commission recommended that grandfathered trailing commissions and fees be banned, and the government vowed to stop them from January 2021.
Beyond Bank Australia’s general manager of customer experience, Nick May, said overall administration and investment management fees in super had been falling “as the fees have become unbundled and more transparent”.
“This has created increased competition, which is expected to continue,” he said.
Mr May said super fund members should check their super fund to make sure they were not paying higher fees to access features and investment options they were not using.
“Look at how the fees are being applied to your account. A flat dollar figure will have more of an impact on a smaller account balance than a percentage-based fee. The opposite is true for larger account balances.”
FIVE OF THE WORST SUPER FEES
• Trailing commissions on older-style super fund products held before 2013
• Entry fees on these old products, including compulsory employer contributions
• Multiple administration charges for people multiple accounts
• Multiple life insurance premiums for people with multiple accounts
• Adviser fees that are a percentage of your fund balance. Why pay more for the same advice because you have a larger nest egg?
STOP PAYING TOO MUCH
• Check my.gov.au to see if you have multiple super funds each charging their own fees.
• If you have several funds, consolidate them to dramatically cut administration costs. This can be done easily on my.gov.au.
• Read your latest super fund statement to check insurance premiums and investment fees.
• If investment fees are greater than 1 per cent of your total balance, ask questions and compare it with other funds.
• Visit comparison websites to explore the competitors’ fees and performance.
LOW-FEE SUPER ACCOUNTS
Fund name Fees Past 5-year returns
Vision Super — Personal Plan $238 9.48%
Bendigo SmartStart Super - $314 7.81%
Personal Division
ANZ Smart Choice Super $340 7.10%
Virgin Money Super $358 N/A
Australian Super $367 10.5%
Source: RateCity, based on a $50,000 super balance
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